After thirty-one rounds of hard work at the negotiating table over eight years, 15 Asia-Pacific countries including Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam reached a consensus on a free trade agreement that was initiated by Indonesia. Once the Regional Comprehensive Economic Partnership agreement (RCEP) , which was signed virtually in Hanoi, is ratified by its 15 members, it will form the world’s largest trade bloc. These 15 nations account for about 30% of the world's population (2.3 billion people) and carry out the same percentage of global trade.
After thirty-one rounds of hard work at the negotiating table during eight years, 15 Asia-Pacific countries icluding Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam reached a consensus on a free trade agreement that was initiated by Indonesia. Once the Regional Comprehensive Economic Partnership agreement (RCEP) , which was signed virtually in Hanoi, is ratified by its 15 members, it will form the world’s largest trade bloc. These 15 nations account for about 30% of the world's population (2.3 billion people) and carry out the same percentage of global trade.
As a deal introduced by the members, it is intended to establish a modern, comprehensive and multilateral economic partnership that will facilitate trade and investment among parties and will work to support an open, inclusive, and rules-based multilateral trading system. It updates and covers the existing ASEAN plus Free Trade Area (FTA) Agreements and reduces tariffs and incorporates the rules in order to cope with the changing and emerging trade realities. Despite those measures to facilitate trade, the direct/short term economic impact of RCEP on its members’ economies is likely to be limited because it is implemented in a region previously economically integrated with a range of economic and trade deals. 83% of goods flowing across the countries that have jointed the RCEP, pass across those economies that already had a trade deal in place among them. Among all parties, China , Japan and South Korea are likely to benefit more from the new regulations and economic ties in this agreement for access to each other’s and other members’ markets than the ASEAN member states that previously were connected to each other via other trade deals; but compared to the economic impact of this agreement, the geopolitical consequences of it can in the long term be a game-changer , not only in the region but also beyond the RCEP borders and in this regard China’s role needs a focus.
While Asia is emerging as a global powerhouse, Beijing is concentrating on expanding its power and influence in Asia and the world. China is the second biggest global economy, and by regard to its size and population, is trying to maintain its role as the driving force of growth in Asia. Even when the world economy is grappling with the challenges arising from the blustering health crisis, China’s economy is bracing to recover from the Covid-19 pandemic, and China is the only big economy expected to grow this year. This can give China an edge compared to its rivals and neighbors in the next decade.
China, as an emerging power, has no way to play an international role but to increase its power and influence in Asia and beyond. In doing so, China’s economic and diplomatic ties in Asia are two instruments to leverage to influence the region. China will continue to strengthen its economic roots in Asia, and closer economic ties with ASEAN could be a turning point for deepening China’s general relations with these countries. From this stand point and a strategic one, it can be found out RCEP can reshape economic ties in Asia and foster a conducive environment for ever more inter-dependency in the economic sector and beyond. In this regard some points have to be made. First, this agreement bestows China the ability and opportunity to influence and set standards and regional multilateral, trade regulations that give China’s jobs and companies a firm competitive edge.
Second, RCEP bolsters investment and trade ties among members mainly by cutting non-tariff barriers (NBT) in the goods and services trade. By considering these measures to facilitate access to each party’s market, China’s status in the regional and global supply chain will strengthen, paving China’s way to rise in the global value chain. Third, further integration and coordination in the region will lead to a bigger market and to China’s attraction increasing as well as the region’s for investment. All this means that this agreement can strengthen the relations of all members with China and due to the asymmetric size and capacity in Asia could be intergraded into the economic- and gradually- political orbit of China.
Playing the main role in Asia is only one side of the RCEP for China, compared to its global impact that could be tremendous. A combination of the Belt and Road initiatives and multilateral agreements like RCEP can picture a globally integrated economic landscape. The Belt and Road supports a collection of land, sea and air connections to create highways, railways and ports connected to one another. These infrastructures will facilitate the flow of Chinese goods through their networks and in the long term develop the world market for Chinese products. RCEP too, will offer China a ground for developing a desired type of state-based regionalism and enjoys symbolic significance in initiating talks in the regions where China is inclined to play a new role in and present its views and solutions. This combination will bring power and legitimacy for the Belt and Road initiative.
Beyond its connection to the Belt and Road, the RCEP has been formed in a time when the anti-globalist wave has discombobulated the world and the US has adopted a protectionist approach against the international trade and the world economy. Despite this approach, RCEP is the first multilateral trade agreement which is based on the rules of a region China has joined. This shows not only China’s commitment to interaction in the Asia-Pacific market, but is a pivotal point in multilateral trade ties across the world. This gives China a frontrunner position in the club of the advocates of globalization and regulation of the world economy.
By looking forward and as part of reality, Asia is headed for dominating the world economy in the future according to the present trends. With these circumstances and considering China’s capacity and resources, China is going to take the spotlight in the international and regional developments. China will continue to support all efforts to integrate the regional countries into its supply and value chain and RCEP, as a trade bloc, gives China the advantage to pull the region into its economic orbit. For this, RCEP is a considerable geopolitical win for China.
Mehdi Zadehali, Iranian Embassy’s Representative for Studies in Beijing
(The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)